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Rainfall Index Vegetation Index

Pasture, Rangeland, Forage (PRF) Crop Insurance Program

Southern Plains Drought Forum USDA, Risk Management Agency

Amy Roeder

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Crop Insurance Goal - PRFRancher’s need an insurance program for their

grazing and haying perilsRMA is committed to meeting those needsLimited options Pros and Cons to both programs (RI/VI)Do producers prefer RI?

THIS IS NOT DROUGHT INSURANCE (Multi Peril)RMA does not use the term drought for the

Vegetation Index program nor for the Rainfall Index program

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Challenges – PRF• Pasture, Rangeland, Forage Crop

1. Various plant species2. Timing of plant growth 3. Lack of individual/industry data 4. Vast range of management practices across

the industry5. Publicly announced prices not available6. Crop continuously harvested via livestock

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Program OverviewArea Plan of insurance Not individual coverageLosses are area based, not producer basedNo loss adjustments, records, etc.More timely paymentsDoes not reward poor management practices

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Program OverviewIndex Intervals

Minimizes dependency on subjective pre-determined biomass growing seasons Elevation, climate, etc. found within an area

Maintains consistency across the country Allows for regional and local variance Allows individual freedom to select appropriate

intervals

Program Overview - VI• Vegetation Index Program

– Area Based Plan– Approximately 8 x 8 km grid vs. county

– Utilizes satellite remote sensing data – Normalized Difference Vegetation Index (NDVI)

– Deviation from Normal: 1989 to 2009, captures multiple perils

– Review of historical indices and how they relate to your ranch is critical

– Critical that peak of growing season is insured and not time periods outside those months

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Program Overview - VICrop Year divided into 10, 3-month index

intervalsMust select at least 1 interval Currently can select more than 1 interval

Some areas fewer intervals are availableAbility for producers to manage appropriate

timing risksThe 3-month intervals provide for greater

reaction to biomass reduction events vs. a yearly average

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Grid Overview – VIArea of insurance = 8 x 8 km (~ 4.9 x 4.9

miles)

Daily Index Calculation

Historical Maximum NDVIon June 1

NDVI on June 1, 2011

Historical Minimum NDVIon June 1

Daily Indexfor June 1=49.7

Program Overview - RI• Rainfall Index Program

– Area Based Plan– 0.25 degree grid vs. county

– Utilizes NOAA daily reported weather data – NOAA: Climate Prediction Center (CPC)

– Deviation from Normal: 1948 to 2009– Review of historical indices and how they

relate to your ranch is critical– Critical that critical precipitation periods are

insured and not time periods outside those months

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Program Overview - RICrop Year divided into 11, 2-month index

intervalsMust select at least two intervals Currently can select up to 6 intervals

Ability for producers to manage appropriate timing risks

The 2-month intervals provide for greater reaction to biomass reduction events vs. a yearly average

California – fewer than 11 Intervals are available

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Grid Overview - RIArea of insurance = 0.25o grids

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What we hear - RIRancher’s believe RMA is using a single point

specific weather stationRancher’s provide NWS, NCDC, WFO, or other

NOAA/USGS/NASA data sets, airport weather reports, etc.

Rancher’s use their own rain gaugesRancher’s believe grid results will always reflect

exact conditions on their ranchPurpose: to provide general rainfall conditions in

a grid, not measure a single gauge

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Where we are today?VI -Ten Index Intervals/year (3 month intervals)

Not all intervals offered in all states – less than 10ONLY 7 intervals have been released to date

Latest interval released to date: July, August, SeptemberRI – Eleven Index Intervals/year (2 month intervals)

All offered in all states – exception CaliforniaONLY 8 intervals have been released to date

Latest interval released to date: August/September

Drought conditions in New Mexico, Texas, Oklahoma, etc. with catastrophic impactsImpacts to the industry as a whole

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2011 VI PRF Est. Losses To Date

StateNet Acres

Insured Liability Premium Indemnity

Percent of Total Acres

Loss Ratio

AZ 28,423 $129,894 $17,523 $32,798 0.80% 1.87

CO 97,000 $847,780 $92,616 $92,491 2.74% 1.00

ID 4,654 $57,302 $5,328 $0 0.13% 0.00

NE 329,853 $7,366,583 $747,948 $6,815 9.31% 0.01

NM 1,317,981 $9,953,521 $1,736,301 $3,703,034 37.21% 2.13

OR 15,793 $241,275 $36,113 $12,751 0.45% 0.35

SD 657,567 $10,415,021 $1,362,337 $25,037 18.56% 0.02

WY 1,091,129 $7,345,212 $1,306,612 $257,699 30.80% 0.20

Total 3,542,400 $36,356,588 $5,304,778 $4,130,625 0.78

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2011 RI PRF Est. Losses To DateState

Net Acres Insured Liability Premium Indemnity

Percent of Total Acres

Loss Ratio

AL 61,480 $6,625,620 $811,640 $796,557 0.20% 0.98 CA 184,674 $20,745,858 $9,767,183 $5,636,748 0.60% 0.58 CO 1,288,485 $21,700,009 $4,150,827 $3,881,798 4.18% 0.94 FL 691,391 $26,859,769 $5,365,077 $3,307,596 2.24% 0.62 GA 22,382 $2,206,107 $315,353 $510,867 0.07% 1.62 KS 170,192 $5,517,928 $890,924 $714,118 0.55% 0.80 MO 51,603 $3,899,893 $536,639 $295,738 0.17% 0.55 MT 3,708,911 $26,873,597 $4,420,899 $1,034,856 12.03% 0.23 NC 29,726 $1,771,962 $191,561 $108,042 0.10% 0.56 ND 2,218,802 $45,165,704 $7,378,768 $299,129 7.20% 0.04 NY 5,005 $937,915 $74,842 $27,581 0.02% 0.37 OK 265,892 $5,089,111 $903,032 $1,966,473 0.86% 2.18 PA 40,470 $11,834,824 $1,240,289 $323,458 0.13% 0.26 SC 5,958 $863,540 $104,616 $81,407 0.02% 0.78 TX 22,024,389 $292,238,897 $67,609,955 $132,209,971 71.46% 1.96 VA 51,003 $4,013,051 $420,397 $232,395 0.17% 0.55Total 30,820,361 $476,343,785 $104,182,002 $151,426,734 1.45

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2011 New Mexico Est. Results (VI)

IntervalNet Acres

Insured Liability Premium Indemnity

Percent Acreage

by Interval

Loss Ratio

Jan/Mar 174,070 1,464,411 184,800 0 13.21% 0Feb/Apr 37,724 262,097 41,331 0 2.86% 0Mar/May 38,930 295,009 44,328 2,007 2.95% 0.05Apr/June 392,795 2,789,981 609,667 375,004 29.80% 0.62May/July 75,476 496,163 83,320 341,737 5.73% 4.1June/Aug 120,039 876,627 127,427 766,847 9.11% 6.02July/Sept 301,254 2,387,609 421,628 2,217,439 22.86% 5.26Aug/Oct 55,837 385,600 70,100   4.24%  Sept/Nov 11,976 100,949 15,541   0.91%  Oct/Dec 109,880 895,075 138,159   8.34%  Total 1,317,981 9,953,521 1,736,301 3,703,034 100.00% 2.13

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2011 – Texas Est. Results (RI)

IntervalNet Acres

Insured Liability Premium Indemnity

Percent Acreage

by Interval

Loss Ratio

Jan/Feb 3,549,348 47,164,423 12,292,185 19,191,401 16.12% 1.56Feb/Mar 427,950 5,114,178 1,318,285 3,982,057 1.94% 3.02Mar/April 3,289,545 42,922,104 10,772,323 37,390,318 14.94% 3.47April/May 676,638 10,838,775 2,017,691 7,673,827 3.07% 3.8May/June 3,235,646 43,175,383 7,561,207 28,527,914 14.69% 3.77June/July 525,868 7,030,586 1,396,687 4,810,668 2.39% 3.44July/Aug 2,935,938 39,486,321 8,647,773 25,508,805 13.33% 2.95Aug/Sept 554,671 8,072,485 1,647,481 5,124,981 2.52% 3.11Sept/Oct 2,986,753 39,411,774 7,876,687   13.56%  Oct/Nov 448,341 6,204,519 1,480,010   2.04%  Nov/Dec 3,393,692 42,818,349 12,599,626   15.41%  Total 22,024,389 292,238,897 67,609,955 132,209,971 100.00% 1.96

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2011 – Oklahoma Est. Results (RI)

IntervalNet Acres

Insured Liability Premium Indemnity

Percent Acreage by

IntervalLoss Ratio

Jan/Feb 25,431 595,585 128,851 233,693 9.56% 1.81Feb/Mar 6,623 98,709 16,107 55,499 2.49% 3.45Mar/April 39,546 806,703 147,712 476,589 14.87% 3.23April/May 29,268 342,722 51,881 184,655 11.01% 3.56May/June 40,573 841,487 112,104 368,526 15.26% 3.29June/July 25,985 314,969 45,115 219,201 9.77% 4.86July/Aug 30,856 707,659 127,153 390,358 11.60% 3.07Aug/Sept 13,736 148,270 25,785 37,952 5.17% 1.47Sept/Oct 22,264 555,136 99,941   8.37%  Oct/Nov 6,719 89,815 18,665   2.53%  Nov/Dec 24,891 588,056 129,718   9.36%  Total 265,892 5,089,111 903,032 1,966,473 100.00% 2.18

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2011 – Kansas Est. Results (RI)Interval

Net Acres Insured Liability Premium Indemnity

Percent Acreage by

IntervalLoss Ratio

Jan/Feb 12,918 753,210 170,607 31,570 7.59% 0.19Feb/Mar 2,535 73,817 18,532 25,423 1.49% 1.37Mar/April 24,814 686,114 100,987 113,089 14.58% 1.12April/May 5,100 238,959 26,239 73,330 3.00% 2.79May/June 29,463 787,313 90,692 89,548 17.31% 0.99June/July 16,471 475,248 56,846 162,079 9.68% 2.85July/Aug 34,243 787,635 118,339 152,829 20.12% 1.29Aug/Sept 17,825 500,521 70,362 66,250 10.47% 0.94Sept/Oct 12,048 380,899 69,459   7.08%  Oct/Nov 4,387 429,701 72,058   2.58%  Nov/Dec 10,389 404,511 96,803   6.10%  Total 170,192 5,517,928 890,924 714,118 100.00% 0.8

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Indemnities To Date -All CropsSTATE Liability Total

PremiumSubsidy Indemnity Loss

Ratio

New Mexico

$172,084,714 $24,967,873 $16,980,657 $30,401,725 1.22

Texas $5,402,811,029 $1,082,748,376 $721,208,034 $1,962,322,125 1.81

Oklahoma $994,649,032 $203,353,438 $127,231,060 $352,234,386 1.73

Kansas $5,238,889,268 $787,569,863 $481,366,877 $608,943,082 .77

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Amy RoederRisk Management Specialist

816-926-3834amy.roeder@rma.usda.gov